EXCLUSIONS FROM ARBITRATION PROCESS MUST BE CLEARLY STATED IN THE CONTRACT

Okanagan Pellet Company Inc. v. Pinnacle Pellet Inc. 2012 BCSC 207 (CanLII)

A court held that when the parties have clearly expressed their intention to submit disputes to arbitration, a party cannot opt out of the arbitration clause unless the contract expressly provides for this. Ambiguous or confusing language in the arbitration provision will not be sufficient to establish an ‘opting out’ provision.

Drafters should note that if the parties intend the scope of the arbitration provisions to be restricted in any way, these restrictions should be expressly stated. In the absence of clear limitations on the scope of arbitration, the arbitration process will prevail.

In Okanagan Pellet Company Inc. v. Pinnacle Pellet Inc. (BCSC 2012), the defendant applied to stay the proceedings on the basis that the dispute was subject to arbitration under the terms of the contract. The contract stated “Disputes that arise between the Parties will progress, until resolved, through the following stages of the Dispute Resolution Process”. The court found that this indicated the parties’ clear intention to submit all disputes to arbitration. The arbitration clause also contained language stating “this Dispute Resolution Process may not be interpreted or applied to delay or restrict the exercise of any right to suspend performance under or terminate this Agreement under the express terms of this Agreement”. The court held that this did not establish an ‘opting out’ provision with respect to termination of the agreement, and was merely an interpretation clause regarding how the dispute clause should be applied. It did not confer a right on the parties to withdraw from the arbitration process. The action was stayed.

To read the full case on CanLII, click here.